Revenue from New Zealand’s goods exports are picking up the pace after a prolonged flat period.
Over 24 months from early 2015, merchandise export revenue struggled to budge from around an annual total of $46bn. However, the last few months have seen a rebound, with the total for the 12 months to July standing at $48.8bn. Still below the peak $49.5bn recorded in the year to August 2014, this increase has been through a combination of recovering dairy prices, a horrendous slump in meat and wool returns, an ongoing surge in forestry, further declines in the struggling manufacturing machinery sector, and small but promising further increases in returns from wine, kiwifruit, mussels, avocadoes, and honey.
In particular, annual export revenue was $1.8bn more than a year ago, a figure entirely accounted for by the $1.8bn upturn in dairy returns, as global prices recovered to more respectable levels and volumes responded accordingly. In contrast, annual meat and wool revenues slumped by close to $600m, as wool prices crashed nearly 20% and meat volumes contracted 7%. Clearly, sheep farming profitability remains a shadow of its former self, and intermittent efforts to strengthen structures in the meat sector seem forlorn in the face of ongoing rationalisations.
In contrast, the viticulture and horticulture sectors have gone from strength to strength in the past few years. Wine export revenue has added another $100m this year to reach an annual total of $1.6bn, despite a slump in prices - an 18% surge in volumes countered a nearly 10% dip in prices. This is the reverse of the story for honey and mussels – with a, respectively, 9% and 27% lift in prices outweighing declines in the tonnage exported. Kiwifruit prices remain stable, with a $90m lift in revenues resulting from a 6% increase in volumes.
And, lastly, the manufacturing machinery exports remains the poor cousin (perhaps, keeping wool company), as it struggles in the face of weak global demand, an unhelpful exchange rate, policy indifference as to the importance of R&D, leaving little chance of achieving economies of scale. The $160m slump in the past year, takes total export earnings for the year down to $2.1bn. This is the same total as was recorded 3 years ago for the year to July 2017; and is well down on the $2.5bn recorded some 10 years ago.
Despite the uptick in export revenue the nation’s merchandise trade balance remains stuck in the red – to the tune of an annual $3.2bn. The country’s import bill rose 3% in the past year, helped by a 22% surge in the value of motor vehicle imports along with a 13% lift in the oil import bill. On the bright side, other import categories are relatively subdued (if not falling). Payments for these are down due to suppressed global prices, as well as the world markets attraction for the local currency holding up the value of the NZ$.